Italy's Renzi wins confidence vote to pass budget in Senate

ROME (Reuters) - Italian Prime Minister Matteo Renzi won a confidence vote to get his tax-cutting 2015 budget through the Senate on Saturday and it is expected to be definitively approved by the lower house of parliament next week.

In a session that ended shortly before dawn, the Senate voted 162-37 to pass a financial package that includes tax cuts for low earners worth almost 10 billion euros ($12.3 billion), and a reduction in labor taxes for businesses.

Italian governments often resort to votes of confidence to truncate debate and speed legislation. The government must resign if it loses such a vote. By law, the budget must be passed by parliament by the end of the year.

Renzi has been pushing for the European Union to allow more spending he says is needed to help Italy, the euro zone's third-biggest economy, emerge from recession and reduce record unemployment. In exchange, he is promising liberalization in areas such as the labor market and the education system.

He was forced to ditch some tax cuts in his original budget draft to meet European Commission demands that Italy do more to reduce its structural fiscal deficit, which is adjusted for swings in the business cycle.

Further belt-tightening measures may yet be needed. The Commission has said that Italy, France and Belgium risk breaching its rules on running sound public finances and it will issue a final verdict on the budgets of all three countries in March.

A Commission technical document seen by Reuters last month said Italy needed to find new deficit cuts worth up to 4.8 billion euros because the extra measures proposed by Renzi, such as cracking down on tax evasion, may not be effective.

The budget aims to keep Italy's deficit at 2.9 percent of gross domestic product, just below the EU's 3 percent ceiling and down marginally for this year's target, which is bang on 3.0 percent.